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Trade tensions, oil price seen as threat to global growth

Posted on Friday, June 01, 2018 by Mercedes Poole

Image The OECD says the global economy is growing but risks loom

After a first-quarter slowdown, the OECD slightly revised down its forecast for world economic growth this year to 3.8 percent, with 3.9 percent expected next year. Further, the economy is expected to grow by 1.3 percent in 2018.

The good news is, among other things, that the OECD expects unemployment to continue to decrease, as well as the public debt, which could be shrunk to 100% of GDP in 2019.

On this month's federal budget, the OECD believes the pace of deficit reduction is "ample" given projected economic growth while noting the proposed reductions in personal taxation over the short and medium term.

The OECD said the rapid growth of government spending, in part to expand public employment, will help support domestic demand and reduce the current account surplus.

"Following a strong recovery in 2017 and turbulence in spring 2018, economic growth is set to slow but to stay around 5 percent in 2018 and 2019", it said.

The country's economic growth was solid in 2017, underpinned by consumption and tourism.

"A sharp housing correction is the biggest downside risk, as household debt has risen to high levels relative to income, and most mortgagees have interest rates that are floating or will be repriced within two years", the report said. "After monetary and fiscal policies have done their jobs, it's time for reforms to sustain the expansion, to improve well-being and to make growth work for all", he added.

In regard to the country's monetary policy, the OECD said that, with consumer price inflation running below 2 percent, monetary policy accommodation can be withdrawn gradually.

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